Pantheon International | ESG

Pantheon International Plc ("PIP") is managed by Pantheon. PIP's Board is fully supportive of Pantheon's comprehensive approach to investing responsibly and championing diversity, as described below.

ESG risks cover a broad range of risks that are encountered when making private markets investments. Pantheon uses the Sustainability Accounting Standards Board (“SASB”) Materiality Map to prioritise areas for the evaluation of ESG risks across all its investment strategies. These include ESG risks which Pantheon believes could have an actual or potential material negative impact on the value of an investment. ESG risks that Pantheon typically considers when making investments and providing investment advice are summarised below:

Environmental

• Environmental degradation;
• Air, Soil and Water Pollution;
• Climate Change;
• Deforestation;
• Nuclear issues;
• Hydrology;
• Impact of Energy Investing;
• Impact of Coal Industry;
• Resource Depletion/Renewable Energy;
• Waste Management; and
• Transparency and Accountability.

Social

• Workplace Health and Welfare;
• Impact on Local Communities;
• Animal Welfare;
• Consumer Protection;
• Diversity and Social Inclusion; and
• Transparency and Accountability.

Governance

• Company Management Structures;
• Control Mechanisms;
• CEO and Board Independence;
• Corporate Values;
• Employee Relations;
• Remuneration Policies;
• Shareholder Rights; and
• Transparency and Accountability.

By reference to the SASB Materiality Map and other sources, Pantheon keeps under review the areas of ESG risks which are considered when making investments and providing investment advice and these may change and develop over time. Additionally, when requested under a specific client mandate, Pantheon may consider for the purposes of that mandate ESG risks which it would not otherwise typically consider.

Pantheon is a signatory of the United Nations Principles for Responsible Investment (“PRI”) and has used the following six principles as a framework to develop its ESG policy across all its investment activities. 

• We will incorporate ESG issues into investment analysis and decision-making processes.
• We will be active owners and incorporate ESG issues into our ownership policies and practices. 
• We will seek appropriate disclosure on ESG issues by the entities in which we invest.
• We will promote acceptance and implementation of the Principles within the investment industry.
• We will work together to enhance our effectiveness in implementing the Principles.
• We will each report on our activities and progress towards implementing the Principles.

Pantheon reviews its continued adherence to these principles on an annual basis through evaluating activities we have undertaken in each year and identifying ways in which we can enhance our ESG risk management.

Pantheon reports to the PRI on the activities undertaken in each assessment year. Most recently, in 2020, Pantheon was awarded an A+ score in the “Overall Strategy” module of the PRI annual assessment and an A+ scores in the “Private Equity” module.

Pantheon has an ESG Committee which is responsible for coordinating our internal and external efforts in this area. The Committee sets Pantheon’s ESG strategy and policy and provides feedback to the wider firm and externally to our GPs and stakeholders on any ESG risk issues that arise. The Committee reports directly to Pantheon’s Partnership Board and comprises the following professionals. Alex Scott and Jie Gong are co-heads of the ESG Committee.

• Alex Scott, Partner, European Investment Team
• Jie Gong, Partner, Asia Investment Team
• Brian Buenneke, Partner, U.S. Investment Team
• Graeme Keenan, Partner, Chief Risk Officer
• Rob Barr, Partner, Head of Investor Relations for the EMEA
• Jerome Duthu-Bengtzon, Partner, Global Infrastructure & Real Assets Team
• Samayita Das, Principal, Global Infrastructure & Real Assets Team

In addition to the committee, Pantheon has a wider ESG Working Group which includes additional members of the Investment Team as well as representatives from the Operations, Investor Relations (including PIP) and Risk Teams.

The ESG Working Group is structured with the aim that various areas of the business are represented and can contribute to our ESG initiatives. For example, our Investor Relations Team is responsible for providing client portfolio ESG risk reports to clients and our Operations Team is responsible for maintaining ESG risk ratings on investments (with guidance from the Investment Team).

While the ESG Committee and Working Group members are responsible for driving our ESG activities, the responsible investment principles are a core tenet of Pantheon’s value system and a common commitment by all its investment professionals.

Pantheon will endeavour to:

• Take account of ESG risks as part of the investment process, with the results forming a key element of the overall analysis on investment opportunities;
• Engage with private equity managers, or General Partners (GPs), with whom we invest to promote the importance of ESG issues and the consideration of ESG risks; ascertain the extent to which GPs factor ESG risks into their investment process; and where necessary provide advice;
• Provide on-going training to Pantheon investment professionals on the ESG due diligence process and the importance of factoring this into the overall investment approach;
• Maintain ESG risk monitoring post-investment, formally assigning ESG risk ratings to underlying companies and GPs;
• Follow a policy of active ownership, highlighting our interest in ESG through our routine interactions with GPs and more specifically in relation to specific incidents;
• Keep our Limited Partners (LPs) and clients such as PIP aware of the level of ESG risks within their Pantheon portfolios through ESG risk reporting; and encourage GPs to provide similar level of reporting on ESG risks;
• Provide advice and education on ESG as part of the investment process to our LPs and clients through updates and tailored workshops; and promote the importance of ESG considerations across the industry more broadly through representation on ESG working groups and participation at conferences, encouraging all industry participants to recognize and act on ESG issues; and
• Continue to develop and enhance our ESG approach to maintain a leading position in the industry.

Pantheon views ESG evaluation as an integral part of the entire investment assessment and due diligence process. For fund investments, each PE manager is rated green, amber or red, based on a variety of factors. Those ranked amber or red are typically lacking in some critical aspect of ESG, for example not having a formal ESG policy in place, no ESG reporting mechanism, or no designated senior person overseeing ESG incorporation. Not having a green rating does not indicate a lack of intention to incorporate ESG or a shortage of the fiduciary mindset. Rather, most often it is a function of a manager being recently formed or with constrained team bandwidth and therefore not having had the time or resources to put in place its policies, or not having seen the benefit of ESG reporting. Many GPs have found the engagement through the ESG rating process to be valuable and, as time passes, most managers migrate to the green rating.

Pantheon will avoid investment in the following areas:

• The production or trade in products or activities deemed illegal under applicable laws or banned through international convention.
• The supply or purchase of sanctioned products, goods or services to or from countries or regions covered by international sanction.
• The production or trades in weapons of mass destruction or inhuman weapons or technology which are subject to existing international prohibitions.
• The production of tobacco or tobacco related products.

There are several areas of investment in which Pantheon may invest, or may recommend an investment, but which require additional due diligence in order to ensure alignment with our overall ESG policy and approach. Pantheon’s investment teams and committees will pay particular attention to the following areas and seek advice from the ESG Committee as appropriate on the following:

• Oil sands extraction or oil shale mining.
• Controversial technology such as stem cell research and genetic modification.
• Companies which operate in sensitive locations such as habitats of ecological importance or land occupied by indigenous peoples.
• Companies whose activities carry a high risk of harm to the environment.
• Gambling.
• Alcohol and tobacco distribution.
• Products and services which are potentially exploitative of vulnerable groups in society including the sub- prime lending sector.

The blind-pool nature of private market fund investments means it may not always be possible to screen out companies pre-investment that are undesirable from an ESG perspective. In such cases, and in accordance with our wider ESG approach, we will seek to engage and influence the manager to improve standards of ESG governance.

Pantheon is a signatory to the Global Investor Statement on Climate Change, which was facilitated by the UN Environment Programme Finance Initiative Climate Change Working Group. Private equity faces specific challenges in addressing the demand from investors for climate-related disclosures due to the lack of agreement on standardised disclosure policies for unlisted companies. However, Pantheon is committed to engaging with and supporting the industry in developing effective reporting solutions and seeks to ensure that our managers are aware of the risks of climate change when evaluating investee companies, and that they act in accordance with relevant climate change regulations. Climate change is incorporated into our ESG due diligence questionnaire and forms part of the manager assessment and rating during the investment selection process. Assisting our GPs on their ESG journey is one of the ways in which we add value as an investor.

We understand that our responsibility and influence extend far beyond the point of investment, which is why Pantheon actively undertakes extensive ongoing portfolio monitoring on PIP’s behalf after an investment is made. One of the ways this is managed is through RepRisk, a third-party news information service that has been fully integrated into Pantheon’s pre- and post-monitoring processes since 2017.

This highly effective tool delivers excellent coverage on issues affecting the underlying portfolio companies, allowing Pantheon to follow up on material issues with the relevant manager to further understand more about the background, assess the accuracy and reporting of the incident and to find out how the manager plans to address the issue or what steps might already have been taken. Often Pantheon is the only investor of this type to have contacted the GP in this way.

Pantheon actively engages with GPs on ESG policy and issues on a continuous basis through its participation on the advisory boards and through the regular portfolio monitoring meetings held with managers. This engagement extends from our initial commitment to an investment, all the way though to divestiture.

The Directors of PIP agree that establishing and maintaining a healthy corporate culture among the Board and in its interaction with the Manager (Pantheon), shareholders and other stakeholders will support the delivery of its purpose, values and strategy. The Board seeks to promote a culture of openness, debate and integrity through ongoing dialogue and engagement with its service providers, principally the Manager.

PIP has a number of policies and procedures in place to assist with maintaining a culture of good governance, including those relating to diversity, Directors’ conflicts of interest and Directors’ dealings in the Company’s shares.

The Board assesses and monitors compliance with these policies as well as the general culture of the Board through Board meetings, and in particular during the annual evaluation process which is undertaken by each Director.

The Board seeks to appoint the best possible service providers and evaluates their service on a regular basis. The Board considers the culture of Pantheon and other service providers, including their policies, practices and behaviour, through regular reporting from these stakeholders, and in particular during the annual review of the performance and continuing appointment of all service providers.

Effective succession planning, leading to the refreshment of the Board and its diversity is necessary for the long-term success of PIP.

The Board has developed its Diversity Policy during the year to 31 May 2020 and this was taken into account in the recruitment of new directors.

The Nomination Committee is responsible for Board recruitment and conducts a continuous and proactive process of planning and assessment, taking into account PIP's strategic priorities and the main trends and factors affecting the long-term success and future viability of PIP.

Pantheon has incorporated a diversity and inclusion section into its due diligence questionnaire for all primary investments. Furthermore, through its position on over 580 advisory boards globally (as at 30 June 2022), it looks to ensure that the issue of diversity is continuously on the GPs’ agendas. We believe that this is not only ethical but also improves performance; our strong belief is that more diverse private equity firms make better investment decisions. In an increasingly competitive world, underlying managers are frequently pitching to management teams that have a choice of who they work with. GPs need to be able to relate to a more broadly diversified set of professionals in the C-suite in portfolio companies and therefore need to field a diverse group of investment professionals. For a fund investor like Pantheon, it is challenging to probe deeply into the levels of diversity at the underlying company level, however, as part of the due diligence process, managers are questioned about diversity in the teams they invest in.

The UK’s Modern Slavery Act 2015 requires Pantheon to report annually on the steps taken to ensure that slavery and human trafficking are not taking place anywhere within the business or supply chains. Pantheon’s ESG policy is already aligned with a zero tolerance approach to modern slavery and trafficking, and both the policy and the Modern Slavery Statement can be found on Pantheon’s website: Pantheon-Modern-Slavery-Statement-July-2022_-Final.pdf (pantheonms.wpenginepowered.com)

IMPORTANT DISCLOSURE

This document and the information contained herein is the proprietary information of Pantheon; it may not be reproduced, provided or disclosed to others, without the prior written permission of Pantheon. This document is distributed by Pantheon which is comprised of operating entities principally based in San Francisco, New York, London, Dublin, Hong Kong and Tokyo. Pantheon Ventures Inc. and Pantheon Ventures (US) LP are registered as investment advisers with the U.S. Securities and Exchange Commission. Pantheon Ventures (UK) LLP is authorized and regulated by the Financial Conduct Authority (FCA) in the United Kingdom. Pantheon Ventures (Ireland) DAC is regulated by the Central Bank of Ireland (“CBI”). Pantheon Ventures (HK) LLP is regulated by the Securities and Futures Commission in Hong Kong. This material has been prepared by Pantheon and is distributed by Pantheon Securities LLC, which is registered as a broker-dealer with the U.S. Securities and Exchange Commission (“SEC”) and is a member of the Financial Industry Regulatory Authority (“FINRA”) and the Securities Investor Protection Corporation (“SIPC”). The registrations and memberships described above in no way imply that the SEC, FINRA or SIPC have endorsed any of the referenced entities, their products or services, or this material.

The information in this material is for illustration and discussion purposes only. Nothing in this document constitutes an offer or solicitation to invest in a fund managed or advised by Pantheon or recommendation to purchase any security or service.

The information contained in this document has been provided as a general market commentary only and does not constitute any form of legal, tax, securities or investment advice, or fiduciary investment advice. It does not take into account the financial objectives, situation or needs of any persons, which are necessary considerations before making any investment decision.

This material is qualified in its entirety by the information contained in any investment product’s offering documents, including any prospectus or other offering memorandum related thereto (collectively, a “Prospectus”) and any governing document of such product. Any offer or solicitation of an investment in an investment product may be made only by delivery of the investment product’s Prospectus to qualified investors. Prospective investors should rely solely on the Prospectus and governing documents of any investment product in making any investment decision. The Prospectus contains important information, including, among other information, a description of an investment product’s risks, investment program, fees and expenses, and should be read carefully before any investment decision is made. An investment in an investment product is not suitable for all investors.

Unless stated otherwise all views expressed herein represent Pantheon’s opinion. The general opinions and information contained in this publication should not be acted or relied upon by any person without obtaining specific and relevant legal, tax, securities or investment advice. The research data included in this publication is based upon information derived from public sources that are believed by Pantheon to be reliable, but Pantheon does not guarantee their accuracy or completeness. Pantheon does not undertake to update this document, and the information and views discussed may change without notice. Legal, accounting and tax restrictions, transaction costs and changes to any assumptions may significantly affect the economics and results of any transaction or investment. In addition, past performance is not indicative of future results. Future performance is not guaranteed and a loss of principal may occur. Market and exchange rate movements may cause the capital value of investments, and the income from them, to go down as well as up and the investor may not get back the amount originally invested. This presentation may include “forward- looking statements”. All forecasts or related statements or expressions of opinion are forward-looking statements. Although Pantheon believes that the expectations reflected in such forward-looking statements are reasonable, it can give no assurance that such expectations will prove to be correct, and such forward-looking statements should not be regarded as a guarantee, prediction or definitive statement of fact or probability.

Portfolio, volatility or return targets or objectives, if any, are used solely for illustration, measurement or comparison purposes and as an aid or guideline for prospective investors to evaluate a particular investment product’s strategies, volatility and accompanying information. Such targets or objectives reflect subjective determinations of an Investment Manager based on a variety of factors including, among others, the investment product’s investment strategy and prior performance (if any), volatility measures, portfolio characteristics and risk, and market conditions. Volatility and performance will fluctuate, including over short periods, and should be evaluated over the time period indicated and not over shorter periods. Performance targets or objectives should not be relied upon as an indication of actual or projected future performance. Actual volatility and returns will depend on a variety of fa ctors including overall market conditions and the ability of an Investment Manager to implement an investment product’s investment process, investment objectives and risk management.

Potential Investment program risks

• Fund of Funds invest in private equity funds. In general, alternative investments such as private equity or infrastructure involve a high degree of risk, including potential loss of principal invested. These investments can be highly illiquid, charge higher fees than other investments, and typically do not grow at an even rate of return and may decline in value. These investments are not subject to the same regulatory requirements as registered investment products.
• A private fund investment involves a high degree of risk. As such investments are speculative, subject to high return volatility and will be illiquid on a long-term basis. Investors may lose their entire investment.
• Private equity fund managers typically take several years to invest a fund’s capital. Investors will not realize the full potential benefits of the investment in the near term, and there will likely be little or no near-term cash flow distributed by the fund during the commitment period. Interests may not be transferred, assigned or otherwise disposed of without the prior written consent of the manager.
• Private equity funds are subject to significant fees and expenses, typically, management fees and a 20% carried interest in the net profits generated by the fund and paid to the general partner/manager or an affiliate thereof. Private fund investments are affected by complex tax considerations.
• Private equity funds may make a limited number of investments. These investments involve a high degree of risk. In addition, funds may make minority investments where the fund may not be able to protect its investment or control, or influence effectively the business or affairs of the underlying investment. The performance of a fund may be substantially adversely affected by a single investment. Private fund investments are less transparent than public investments and private fun d investors are afforded fewer regulatory protections than investors in registered public securities.
• Private equity fund investors are subject to periodic capital calls. Failure to make required capital contributions when due will cause severe consequences to the investor, including possible forfeiture of all investments in the fund made to date.
• Governing investment documents or the related Prospectus or the managed account agreement, as the case may be, are not reviewed or approved by federal or state regulators and privately placed interests are not federally or state registered.
• Fees and expenses – which may be substantial regardless of any positive return – will offset an investment product’s profits. If an investment product’s investments are not successful, these payments and expenses may, over a period of time, deplete the net asset value of the investment product.
• Managers/advisors and their affiliates may be subject to various potential and actual conflicts of interest.
• An Investment Product may employ investment strategies or techniques aimed to reduce the risk of loss which may not be successful.